When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (SPY) - BUY
BUY the S&P 500 (SPY) May 2021 $427-$432 in-the-money vertical BEAR PUT spread at $4.40 or best
Opening Trade
5-5-2021
expiration date: May 21, 2021
Portfolio weighting: 10%
Number of Contracts = 24 contracts
If you don’t do options stand aside. This is a short-term options expiration play only.
It is “Sell in May and go away” time. Keep in mind this only works half the time. However, all the important earnings reports for Q1 are out now and the fireworks are winding down.
I think we may be in for a flat to slightly falling market for the next six weeks. It’s not worth taking long term profits, but it is worth adding some downside protection and taking in some free option premium.
We have a small rally today in the (SPY) which I want to take advantage of to double up my short position.
I am therefore buying the S&P 500 (SPY) May 2021 $427-$432 in-the-money vertical BEAR PUT spread at $4.40 or best
Don’t pay more than $4.70 or you’ll be chasing.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This is a bet that the S&P 500 (SPY) will not trade above $427 by the May 21 option expiration day in 7 trading days. That is up 27 (SPY) points, or $2,000 Dow Average points from here.
Here are the specific trades you need to execute this position:
Buy 24 May 2021 (SPY) $432 puts at………….………$15.00
Sell short 24 May 2021 (SPY) $427 puts at………….$10.60
Net Cost:………....………………….………..………….….....$4.40
Potential Profit: $5.00 - $4.40 = $0.60
(24 X 100 X $0.60) = $1,440 or 13.63% in 7 trading days.
If you are uncertain about how to execute an options spread, please watch my training video by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
